In February 2012 Fortis announced that it had entered into an agreement to acquire CH Energy Group, Inc. ("CH Energy Group") for US$65.00 per common share in cash, for an aggregate purchase price of approximately US$1.5 billion, including the assumption of approximately US$500 million of debt on closing. CH Energy Group is an energy delivery company headquartered in Poughkeepsie, New York. Its main business, Central Hudson Gas & Electric Corporation, is a regulated transmission and distribution utility serving approximately 300,000 electric and 75,000 natural gas customers in eight counties of New York State's Mid-Hudson River Valley. The transaction received CH Energy Group shareholder approval in June 2012 and regulatory approval from the Federal Energy Regulatory Commission and the Committee on Foreign Investment in the United States in July 2012. In addition, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired in October 2012, satisfying another condition necessary for consummation of the transaction.
Approval by the New York State Public Service Commission ("PSC") of the Corporation's acquisition of CH Energy Group is the last significant regulatory matter required to close the transaction. A Settlement Agreement among Fortis, CH Energy Group, PSC staff, registered interveners and other parties was filed with the PSC in January 2013. The parties to the Settlement Agreement have concluded that, based on the terms of the Settlement Agreement, the acquisition is in the public interest and have recommended approval by the PSC. A Recommended Decision issued on May 3, 2013 by administrative law judges in connection with the acquisition asserts that without modification of the Settlement Agreement, the benefits of the acquisition are outweighed by perceived detriments remaining after mitigation. The Recommended Decision is an advisory opinion that will be considered by the PSC in determining whether to approve the acquisition. While no assurance regarding a closing of the transaction can be given until an order is issued by the PSC, a final decision by the PSC and subsequent closing of the transaction is expected in June 2013.
Unless extended by agreement of both parties, the agreement and plan of merger between Fortis and CH Energy Group expires August 20, 2013 (Notes 8, 19 and 21).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") for interim financial statements. As a result, these interim consolidated financial statements do not include all of the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Corporation's 2012 annual audited consolidated financial statements. In management's opinion, the interim consolidated financial statements include all adjustments that are of a recurring nature and necessary to present fairly the consolidated financial position of the Corporation.
Interim results will fluctuate due to the seasonal nature of gas and electricity demand and water flows, as well as the timing and recognition of regulatory decisions. As a result of natural gas consumption patterns, most of the annual earnings of the FortisBC Energy companies are realized in the first and fourth quarters. Given the diversified group of companies, seasonality may vary.
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